Last June, in a modest cemetery near Abingdon in Oxfordshire, a small group of friends spread out a picnic next to the grave of one Eric Arthur Blair and discussed what they thought would be the biggest issues for civil liberties in the coming year. This annual pilgrimage to the resting place of George Orwell, the author of Nineteen Eighty-Four and creator of the original Big Brother, will become a very busy picnic this year, and high on the agenda will be the rise of location-based services.

You can't go anywhere these days without hearing about the location tools Foursquare and Gowalla. Twitter is full of people "checking in" at work, checking in at the station, checking in at the pub. But why the sudden preoccupation with telling everyone where you are? Isn't it yet another banal distraction? And isn't it Orwell's nightmare come true?

In essence, it's not very sinister. What these people are doing is competing in a simple status game: look up the place you're in, check in and earn points. Compete with your friends to earn more points. And later exchange those points for prizes. Foursquare, Gowalla and their rivals offer various takes on that principle, from Rummble's venue reviews to Hot Potato's focus on live events.

Location has been an increasingly important challenge for the technology sector for years, increasingly relevant as mobile networks, handsets and content have improved. With hundreds of apps for the iPhone, BlackBerry, Nokia, Google Android handsets and more, imaginative startups can easily reach a large, tech-savvy consumer base willing to try out new tools and ideas. The data created by users' checkins is a powerful analytics tool for small businesses. With user numbers set to reach one million this month and 22m checkins so far, revenue plans revolve around relationships with businesses and around 1,500 small deals are in place already.

So why are so many people trying it out? It's safe to assume that most of the few hundred thousand people populating these tools are still curious geeks who are, in the main, aware of the implications of sharing their location and inhabit the sheltered world of the early adopter. Longer term, as we have seen repeatedly, tools are only as decent or dangerous as the person wielding them.

Even Christian Payne, a social media expert and organiser of the Orwell picnic, has his concerns, and as these tools become more mainstream users must be aware, for example, of the risks of burglary, when they broadcast their location away from home. He has been experimenting with a newer service called Rally Up that offers greater privacy controls and emphasises connecting with "real" friends. One way or another, it will eventually become clear how best to manage privacy on these services – and then the fun can begin.

And games are fun: Foursquare's founder, Dennis Crowley, said last week at the location conference Where 2.0 in California that his inspiration was to make life more like a video game. That's why Foursquare and Gowalla are taking off – part of a broad wave of casual gaming from Farmville on Facebook to ZombieSmash on the iPhone. Points, rewards and leaderboards aren't exclusive to location services, either. Gaming structures have long been applied to real-world scenarios, a strategy championed by the celebrated games designer Jane McGonigal, who argues for the benefits of utilising gaming skills such as problem-solving and teamwork.

Her Cryptozoo project for the American Heart Foundation encouraged players to chase around a city hunting mysterious animals – exercising along the way. "When people think of computer games, they often think of playing in a virtual world that doesn't exist in reality," she told the WorldChanging network last month. "But alternate reality game designers are trying to get people to play in the real world. We want people to bring the same curiosity, wonder, and optimism that you feel when playing your favourite video games into your real lives and real problems."

For media companies with large, engaged and passionate audiences, this is a field rich in potential. Simple games structures and rewards for frequent, interesting and valuable commenters could increase loyalty and traffic, or encourage teams of readers to contribute to crowdsourced projects to earn points. The opportunities are only as limited as imagination and resources – both in short supply in the media industry at present.

In the meantime, it is up to Foursquare and the rest to establish the ground rules, and many improvements are needed to make these new tools easier to use and fit better with existing web networks, such as Twitter and Flickr.

Beyond the dull, material business of marketing and incentive coffees, Payne has his own ideas for exploiting the creative potential of combining – augmenting – the virtual and physical worlds. Orwell's grave, for example, could be geotagged with audio, photos and written reports of the civil liberties discussions on his birthday last year. Millions of pieces of content are being geotagged every day. The opportunities lie in connecting that material with people, making the combination of clever technology and skilled editors as important as ever. There's a whole virtual world out there to be explored, tagged, shared and checked in to. What would Orwell have made of it all?

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